Friday, March 18, 2011

I just returned from Lucerne (Luzern) Hospital here in Switzerland after spending few hours with Dr. Ahmed Ghareeb, a wonderful hero of the 2011 Egyptian Revolution. Ahmed is a physician who later studied IT and became an IT specialist with Oracle in Cairo. January 28th was one of the most violent days of the Revolution; Ahmed was trying to stop a Republican Guard armored truck from delivering what looked like tear gas canisters to the police. Ahmed thought the vehicle was regular military; he was confused as to why, when the Army was generally neutral or protecting the protestors, this particular vehicle was attempting to aid the police. Apparently the Republican Guards look like Army but receive orders directly from the Presidency. After trying to plead with the officer in charge not to aid the police, the officer, agitated, shouted “I will kill you mom’s boy!”; the vehicle ran him over. Ahmed lost consciousness immediately and was taken to a hospital. Eight days later Ahmed finally opened his eyes, he did not recognize his own mother. Following intensive treatment in Cairo hospitals during February and thanks to the support of Oracle, Ahmed’s family and many friends he was moved to the care of a specialist team in Lucerne on March 4 where he has been undergoing extensive tests and evaluations since his arrival.

I met Ahmed for the first time today, he is now able to use his laptop for short periods , talk coherently, but still not able to concentrate and has very serious damage to the left side of his face, left eye, and has lost hearing in his left ear. He will need a battery of surgeries to fix extensive nerve, bone and blood vessel damage, followed by attempts to fix hearing and repair of the damage to the eye. Ahmed’s first surgery is scheduled next week and could last up to 17 hours. Today, Ahmed was upbeat, positive, amazingly strong, courteous and so full of grace.

Ahmed Ghareeb is typical of the young people of Egypt who protested against the brutal oppressive regime of deposed President Mubarak. People from the middle and upper classes of Egypt rose for their dignity, out of a belief that Egypt deserves better than a thuggish torture ridden police state. Geeks, bloggers, employees of Oracle, of Google, university professors, dentists, writers, lawyers, singers and eventually all of Egypt rose peacefully for freedom and human rights; they made Egypt proud and the world looked on in admiration.

As Ahmed and I talked today, we discovered a common bond, our love for the Sinai Peninsula our love of the desert and Red Sea. Ahmed spoke to me about his passions with a wonderful sparkle in his right eye. Ahmed promised to show me the remains of giant whales 400 km inland in Egypt’s western desert in Wadi Hitan; a beautiful spot that Ahmed loves to camp in. I can’t wait for him to show me his favorite desert spots. With Ahmed’s determination, the support of his family and friends from Egypt and Oracle worldwide and the wonderful team of doctors who have cared for and will care for Ahmed, this will be soon, I am sure.

Sunday, March 13, 2011

Invest in Egypt but don’t gamble against the odds on the stock market!

The Egyptian Stock Exchange has been closed since the early days of the January 25 Revolution. Following the toppling of Mr. Mubarak a chorus of calls for action, donations and investment in the stock market has been getting louder in the press, social media and even in SMS text messages from banks. The continued closure of the stock market has fueled a high level of anxiety amongst many and with so much excitement about the possibilities for change and progress the wonderful people of Egypt are willing listeners to advice that they think can help Egypt and its economy.

While I am not an economist, I have been at leadership positions of public companies in the US & Europe and I have also been an adjunct lecturer on mergers & acquisitions for a number of years. So what I express here is my personal view as a practitioner who has to deal with issues of stock price, investor sentiment and public markets in general day in and day out and as also as an educator of business students looking at how companies create value and how they are valued.

International investors evaluate numerous factors to make their decisions about expanding their investment in a company, sector or country. Egypt has many important attractions, large population, excellent strategic location, availability of foreign language friendly work force, good access to markets and so forth. However, certain factors have impacted investment in Egypt negatively, specifically corruption, arbitrary & corrupt taxation and an inefficient, slow and often corrupt justice system.

Political stability is another key issue that has affected attitude towards investment in Egypt and likely will continue to do so. I fear that the current plan chosen by the Supreme Council of the Armed Forces, to install a temporary constitution and only move to a permanent one after a round of presidential and parliamentary elections followed by further elections for a drafting committee and further referendums, will prolong the period of uncertainty. The Egyptian Military caution is understandable on a number of fronts and a gradual approach that allows for the building up of democratic institutions over a year or two under a relatively benign military rule has its attractions, but also its price, a price from uncertainly over process, intent and what the ultimate outcome may look like and its desirability.

In a theoretical “perfect market”, the value of a company or a business is a function of one’s view of the future cash profit that a particular company would generate for its owners; stocks or shares represent fraction ownership of a company. Obviously people can have differing views on what the future may hold for a company and thus there will be those willing to buy and others willing to sell. If we assume company in the tourism industry in Egypt, the prospects for future profit and cash generation would have been seen as promising over the last few years, however, today there is little doubt that 2011 will be a difficult one for the tourism sector in Egypt. Companies in the tourism sector may actually make less profit or actually lose money; the value of these companies and their shares is therefore reduced in a “perfect market”.

The situation in any stock market is far from that of a “perfect market”, there are other factors that affect share prices; basic supply and demand for the actual shares and expectations of this supply and demand. If one hears that a shareholder in a specific company will be selling a large block of shares, it is likely that this could affect the price per share. So as we look at a company like Ezzsteel with its Chairman and Managing Director Mr. Ahmed Ezz in prison facing a number of charges, it is unlikely that many investors will be wanting to acquire shares in Ezzsteel when the market does eventually open, arguably many would want to sell shares. The prospects of the steel industry may not have materially changed by the January 25 Revolutions yet, the supply and demand situation of the shares has likely changed. The ownership of a significant percentage of companies listed on the Egyptian Stock Market is concentrated in the hands of large shareholders and it is the perceived and the actual attitude of these large shareholders that could have a decisive effect of the share prices of their companies.

The stock market when it does open in Egypt will likely see a drastic reduction in value because of the expected economic weakness at least for 2011, because of the uncertainty surrounding several prominent business families with large controlling blocks in many listed companies and there will likely be further penalty associated with a perceived higher political instability risk. The positive sentiment associated with the competent corruption fighting government of the new Egyptian Prime Minster will likely not be enough to counter the three big negatives. So there are good reasons for the stock market to go down.

Experience has shown that betting against economic fundamentals can only work in the short term but rarely so in the long term. People who want to avoid or minimize the collapse in the Egyptian stock market need to focus their effort on the three causes; the share prices are the outcome, just the symptoms. A campaign to encourage buying Egyptian made products domestically and internationally would contribute to the health of Egyptian companies more than buying few shares from co-investors of Mr. Ahmed Ezz while his own shares remain frozen. Promoting tourism in an intelligent campaign with significant price reductions and improvement in service is critical to save jobs and businesses in the tourism sector.
Most importantly, is the further thoughtful review of the plans to achieve the objectives of the January 25 Revolution as adopted by the Military. Plans and process to rid Egypt from corruption fix the justice and dispute resolution system and remove the old dictatorial system of Government need to be transparent and inclusive.

Egypt today stands at a high place, admired by the people of the world for its peaceful revolutions and while the army may have hesitated and bungled a number of important matters, it continues to be seen positively globally. In short there is tremendous goodwill by the world Government, people and investment community towards Egypt; now the key priority to focus on the fundamentals.

Sunday, March 06, 2011

Wisdom of the ancient Egyptians is contained in the famous Book of The Dead. Egyptians celebrate feasts going to cemeteries, the world grandest tombs are our pyramids, when it comes to death, we excel, right? I always thought being Egyptian American was the ultimate philosophical contradiction in terms of outlook on life and death! Wrong, the Egypt that I saw on Twitter and Facebook for the past few months and specially since "#Jan25" or the January 25, 2011 Revolution is very much alive, not cynical but open, optimistic, tolerant, inclusive and vital. The outpouring of positive energy and creativity in all facets of life is beyond description and imagination. Enough adjectives and here are highlights of my seven hours in Tahrir Square.

On arrival ID checks and two patdowns, searches, organized, smiling, apologized for search and a big “Welcome to Tahrir”. ID checks to confirm not employed by police or other undesirable internal security apparatus for those are the trouble makers in post Jan25 Egypt! Traveling from Cairo Airport to nearby suburb Naser City to downtown, I saw virtually no police, amazing when they are normally ultra visible. Funnily enough, I only saw just limited military on my way to the airport, one tank and 3 soldiers to be accurate; yet Cairo felt more organized and safe than normal!

Inside Tahrir it felt like being in a surreal world, like being in a concert, carnival or even an amusement park. People selling flags, drinks, all types of foods and souvenirs; all handing out lots of smiles. Occasional spontaneous chants and mini marches memorizing martyrs, mocking or calling for the trial of former regime members or wanting their money. In normally classist Egypt, people were mixing easily, chatting and always smiling. I always thought Egyptians while having a wicked sense of humor were normally sad and subdued, in fact Egyptians normally ask forgiveness of God whenever they have a good laugh with the short prayer for God to make this laughter for a good thing or “Allah yegaloh khier”; the Egyptians in Tahrir were smiling and laughing unapologetically and optimistically; it was their right to be happy, finally!

Lots of people were passing leaflets; some rejecting the proposed constitution, others offering help to clarify their constitutional views, another for some presidential candidate with a ten point plan: number 9 was "A considered and thoughtful plan to reduce the number of spinsters". The big emphasis from most is ending detentions, ending the hated State Security apparatus and the new constitution.

My own brother insisted on buying a Libyan revolution flag when he saw someone walking by carrying one. He wanted to show solidarity. By noon the area was getting very full of people when the Muslim friday prayers were held. Amazingly people knelt down for prayers all mixed up, men, women, Christians, Muslims; some men asked women to sit down for prayers, some did, others didn't. It was relaxed and comfortable and the Imam addressed the sermon to Egyptians Muslims and Christians and called on the Shiekh of Al Azhar to be an elected not appointed post.

Women who were very visible in this revolution were also visible in Tahrir, the majority had their hair covered, many didn't and some had the once dreaded face cover. My own prejudices against the veil fell apart as I saw assertive activist women taking part in the revolution fully, no back seats and many if not most calling for a secular civil state.

For me, one of the main faces of the revolution is the wonderful and articulate Asma Mahfouz, an activist blogger whose courage, determination in her video blogs helped galvanize the movement and actually got people out on Jan 25. This modest girl with the headscarf shamed the nation into getting out to protest against Mubarak as she recounted stories of being a girl amongst a handful of protestors in the face of truckloads of Central Security. I didn't see Asma in person but I saw many like her.

While sitting on a curb facing the "Mogamma" the central administrative building of the state on Tahrir Square, another young Asma with a large tatterd bag came collecting the empty bottles, cans and food wrappings; an hour later a young man came in for the same purpose. They went about their tasks silently, unobtrusively, not complaining, not uttering a word. I found myself rushing ahead of them to collect the garbage with my hands to put in their white bags. I felt humbled by the courage, organization and dedication of those beautiful young people of Egypt. For Jan25 is a revolutions that cares about what it leaves behind, it cleans after itself.

At about 1 pm, the newly appointed Prime Minister of this country of 85 Million people walked by us with no visible guards to the make shift stage at the edge of the Square. I saw him and took few photos with my phone, but the audio did not cooperate, I could not hear what he said and the crowd was intense. Fireworks in the midday sun of Cairo and loud chants erupted, I found out later it was his pledge to achieve the will of the people. Closer to 3pm I walked around the rest of the Square listening to many speeches by men and women in the different corners of this wonderful Republic of Tahrir ...all people believing in a better future. Doubtless the various factions that brought Egypt to this success will splinter into Socialist, Arabist, Liberal, Islamist, Egyptian Nationalist and others, one has to feel a certain amount of gratitude towards the hated Mubarak for making it possible for these various groups to unite and learn to work together so well.

Many thoughts and fears still crowd my head, but I wanted to communicate what I saw, perhaps still a bit raw and full of emotion and excitement. I still hear the young man who was selling flags and painting faces lamenting that Friday March 4 was likely the last big protest, I hope he is right and being Egyptian American and now mainly a Tahriri, I have to be optimistic.